What Were the Economic Views of the US Founding Fathers?

In his lecture, delivered at the Valdai Club, Professor Steven Pincus of Yale University, focused on some common misinterpretations of the US Founding Fathers’ motivations to break away from Britain and explained why, in George Washington’s view, the aim of the Declaration of Independence was to secure freedom and privileges guaranteed by the British constitution.

On June 8, 2017, the Valdai Club hosted Steven Pincus, Bradford Durfee Professor of History at Yale University, who delivered a lecture on the influences that shaped the Founders of the United States as well as the nation’s founding document, the Declaration of Independence.

Professor Pincus began by identifying what he called the central question of why the North American colonies decided to break away from the British Empire in the 1770s. According to Pincus, the usual answer – that the corrupt British government intruded too much in the lives of American colonists, who, in the words of historian Gordon Wood, viewed “society as beneficial and government as malevolent” – is false.

What made Britain different from other empires of the time was that it devoted far more resources to colonial development, Pincus said. In the 18th century, such states as Spain, Russia and the Holy Roman Empire spent over 90% of revenue on war, while the British war expenditure was about 65%. The remainder was largely spent in the colonies (this included Scotland and Ireland, which, he said, were treated the same way as Britain’s overseas possessions). The money was used to subsidize immigration, develop trades, build infrastructure and finance disaster relief.

In fact, Professor Pincus said, the pre-1770s Britain was an empire, which heavily invested in developing its colonies. Such were the political views of the Patriots faction who had developed a political economy of state-supported growth in response to the debt crises of the 18th
century. The Patriots believed in subsidized immigration to support the development of colonial economies; state support of trade to enhance colonial dynamism; increased popular participation in politics in order to maximize political information; and elimination of the slave trade and slavery for both economic and moral reasons.

Their variety of patriotism, Professor Pincus said, motivated George Washington and played a significant role in the Declaration of Independence. It focused less on abstract philosophical claims to rights than on an argument about political economy – the proper relation between the state and the economy. When Washington received news of the Declaration of Independence, he told his troops that its aim was to secure “that freedom and those privileges” guaranteed by the British constitution, encroached on by King George III.

In fact, most of the Declaration of Independence was an indictment of his government. Professor Pincus pointed out that we tend to overemphasize the wrong parts of the document, like the famous pronouncement that all men are created equal. These parts were indeed “self-evident” to Europeans of the Age of Enlightenment, including the opponents of the American colonists in the British government. Meanwhile, it was the criticism of policies under the rule of George III that caused most anger in Britain.

Under George Grenville, who was prime minister in 1763-1765 and pursued an economic programme based on the same principles as that of Robert Walpole (prime minister in 1721-1742), Britain was transformed from a state that pursued development into an empire that favoured extraction and responded to debt crisis with austerity rather than stimulus. It was a firm belief of the Patriots that colonial development and consumption of British goods would pay down the debt, hence the government should support migration and trade with Spanish America, instead of directly taxing the dynamic part of the economy, Pincus said.

While Patriots believed that infinite economic growth was only possible through the interplay of production and consumption, the British government relied on the Sugar Colonies for production instead of stimulating consumption in the North American colonies, hence their rejection of slavery, as slaves cannot be good consumers. In addition, since 1763, Britain had sought to tighten restrictions on colonial trade, destroying American commerce.

In the end, the American Patriots’ opposition to British rule was largely economic, Professor Pincus said. Contrary to popular belief, they did not stand for small government, quite the opposite: they wanted state support for immigration, the opening of markets for manufactures, development, and suppression of slavery. The Declaration of Independence tried to restore a state that would support development. What the US Founding Fathers wanted was to create a “Patriot Empire,” he concluded.